Rexford Industrial Realty, Inc. — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020. The filing is an annual report, not a standalone fourth-quarter report; quarterly results are also presented. Rexford is a REIT focused on owning, operating, acquiring and redeveloping industrial properties in Southern California infill markets.
Business and portfolio
- At year-end, the consolidated portfolio comprised 248 properties and approximately 31.5 million rentable square feet; occupancy was 95.2% and leased occupancy was 96.2%. The stabilized portfolio was 96.7% occupied.
- Annualized base rent was $310.4 million. No tenant represented more than 2.7% of base rent; the ten largest tenants together represented 11.4%.
- Portfolio exposure is concentrated in Los Angeles County (57.0% of rentable area). Wholesale trade, transportation and warehousing, and light manufacturing accounted for 25.4%, 24.7%, and 18.9% of annualized base rent, respectively.
Financial performance and liquidity
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Total revenue | $330.1 million | $267.2 million | +23.5% |
| Net income | $80.9 million | $64.0 million | +26.4% |
| Net income per diluted common share | $0.51 | $0.47 | +8.5% |
| FFO | $182.5 million | $146.6 million | +24.5% |
| Cash from operating activities | $183.0 million | $139.5 million | +$43.5 million |
| Dividends declared per common share | $0.86 | $0.74 | +16.2% |
- NOI was $249.7 million, up from $201.0 million; cash NOI was $227.7 million, up from $185.5 million. Same-property rental income increased 3.8%; same-property occupancy averaged 98.3% versus 98.0%.
- Net income growth reflected portfolio expansion and operations; property-sale gains were $13.6 million versus $16.3 million in 2019. COVID-related collectability assessments reduced rental income by $5.0 million, compared with $0.7 million in 2019.
- Cash and cash equivalents were $176.3 million at year-end, with $500 million available on the undrawn revolving facility. Investing activities used $987.5 million, chiefly for acquisitions and capital expenditures; financing activities provided $903.2 million.
- Debt was $1.223 billion, with a weighted-average interest rate of approximately 3.06% and average term to maturity of 6.6 years. About 95% was effectively fixed-rate; net debt to total market capitalization was 12.9%. The company reported compliance with debt covenants.
Material changes and notable activity
- Acquired 38 properties with 5.0 million rentable square feet for a gross contractual purchase price of approximately $1.2 billion; sold four properties for $45.5 million gross proceeds.
- Issued 17.3 million common shares during 2020 through ATM sales and two public offerings, generating approximately $734 million in net proceeds. The company also issued $400 million of 2.125% senior notes due 2030 and repaid a $100 million term loan.
- Expanded the unsecured revolving facility to $500 million and extended its maturity to February 2024, with two six-month extension options. Moody’s and S&P assigned investment-grade ratings, joining Fitch’s existing rating.
- Completed construction of The Merge, a 333,544-square-foot redevelopment; it was 18% leased at year-end. Management estimated approximately $147.4 million of capital would be needed over 2021–2023 for identified repositioning and redevelopment projects.
Outlook, risks and unusual items
- No formal earnings or FFO guidance is provided. Management described tenant demand and leasing spreads as strong and expected positive renewal rates and spreads in 2021, while cautioning that COVID-19 could make results weaker than 2020.
- COVID rent collections improved after relief agreements: collections after relief were 99.1% for Q2, 98.6% for Q3 and 98.0% for Q4 2020, measured through February 16, 2021. Agreements with 270 tenants included $4.6 million of deferred base rent for 120 tenants. Government-mandated rent deferrals, tenant credit, and the ability to collect deferred rent remain risks.
- Lease expirations are significant: 15.3% of portfolio area was scheduled to expire in 2021 and 14.5% in 2022. Year-end vacancy was 4.4%; management also reported 1.1 million square feet available for lease after excluding signed, uncommenced leases as described in the filing.
- Key risks include geographic concentration in Southern California, tenant and industry exposure, leasing competition, acquisition and redevelopment execution, interest rates and refinancing, and earthquakes, wildfires and other potentially uninsured losses. Most tenants are not investment-grade rated.
- Unusual items include the $13.6 million net gain on property and personal-property dispositions, a $0.1 million debt-extinguishment loss, and a $3.3 million net gain on the Fairview sale following reclassification to a sales-type lease. The auditor issued an unqualified opinion; purchase-price allocation for acquired real estate was identified as a critical audit matter. Management and the auditor reported effective internal controls.
Investor facts to verify
- How much of reported earnings and FFO growth came from acquisitions, same-property performance, and property-sale gains; also compare per-share growth with share-count growth.
- Whether COVID-related deferred rent was collected, and whether local rent-deferral or eviction restrictions changed after the filing’s February 2021 updates.
- Lease rollover, retention, renewal spreads, and occupancy trends—especially for the 2021–2022 expirations and redevelopment space.
- Funding and returns for the planned $147.4 million redevelopment program, pending acquisitions, and any further equity issuance.
- Debt maturities, covenant headroom, refinancing costs, and exposure to reference-rate transition; assess the effect of the $400 million notes and secured debt.
- Whether earthquake and other insurance limits, deductibles, and environmental coverage adequately address concentrated-property risks.